80 Park Plaza in Newark, the home of Public Service Enterprise Group — Courtesy: Columbia Property Trust
By Joshua Burd
The northern New Jersey office market continued to weaken in the first quarter, with large availabilities mounting as companies shed excess space and continue to work remotely.
That’s according to a new report by Newmark, which found that the amount of occupied space in the market fell by nearly 1.8 million square feet at the start of 2021. That includes large blocks in Newark that were relinquished by the likes of Prudential Financial and Public Service Enterprise Group, which put a combined total of more than 400,000 square feet on the market.
That contributed to the region’s fifth straight quarter of negative net absorption for the office market, the report found, with sublet spaces accounting for nearly 41 percent of the quarterly increase in availability.
“As companies grapple with an economy still in recovery, while simultaneously determining post-COVID occupancy plans, many are choosing to dispose of space,” the Newmark team of Mark Russo and Colin Hyde wrote in the report. “The impact on the market is widespread, with the six largest submarkets each reporting more than 200,000 square feet of negative net absorption for the quarter.”
According to the report, Newark was the hardest-hit submarket in northern New Jersey during the quarter, with availability rising to 27.1 percent from 23.3 percent as a result of the moves by Prudential and PSEG. But large blocks hit the market in other locations, including more than 250,000 square feet at 412 Mount Kemble Ave. in Morris Township that was previously leased to WSP and ProSight Specialty Insurance.
In the Princeton submarket, Newmark pointed to 225,000 square feet that became available at 777 Scudders Mill Road and 113,000 square feet at 4 Research Way. Tenants also gave back blocks of more than 100,000 square feet during Q1 in the Parsippany, Interstate 78 and Hudson waterfront submarkets, the report found.
Newmark, meantime, pointed to 1.6 million square feet of leasing activity that closed during the quarter, which is 15.2 percent below the quarterly average seen over the past three years. The two largest deals included Honeywell International leasing back 131,745 square feet at 115 Tabor Road in Morris Plains in conjunction with its sale of the 447,000-square-foot building, while Mallinckrodt Pharmaceuticals took 101,641 square feet at 53 Frontage Road in Hampton.
The report noted that both leases involved companies that are shrinking their footprints in New Jersey. Honeywell has downsized and moved its headquarters out of the state after previously occupying all of 115 Tabor Road, while Mallinckrodt recently filed for bankruptcy and put 230,000 square feet on the market at 1405 and 1425 Route 206 in Bedminster.
The report also offered a mixed outlook for the near term.
“Asking rents continue to hold steady, averaging $29.86 (per square foot), though landlords are starting to accept lower net effective rents on a deal-by-deal basis,” the report said. “While it has not yet impacted the reported statistics, a recent uptick in touring and leasing proposals coinciding with the vaccine rollout indicates that a market recovery may be on the horizon.”